Key Takeaways

Pay equity is a crucial part of a successful diversity strategy, helping companies to attract and retain talented and motivated employees.

Measuring and publicly reporting on pay equity is an important tool in advancing gender diversity and in closing the overall gender gap in the workforce.

The role of business has never been more critical in advancing gender equality, and it will require the combined efforts of many to close the gap.

Many investors have long recognized the benefits associated with gender diversity in corporate leadership—including attractive financial performance, improved decision-making and oversight—and have engaged in a variety of initiatives aimed at increasing the representation of women across all professional levels, from entry level positions to the C-suite and boardroom.

We’ve seen some progress: Following a series of board diversity campaigns coordinated by the Thirty Percent Coalition since 2012, more than 150 companies have added women to their boards. That said, progress remains painfully slow. Recent research from Mercer indicates that current female hiring, promotion and retention rates are inadequate to create gender equality over the next decade.1 In addition, a stubborn gender pay gap persists.

While shareholder engagement efforts have traditionally focused on increasing women on boards and in management, measuring and publicly reporting on pay equity has emerged as another tool in advancing gender diversity. Pay equity is a crucial part of a successful diversity strategy, helping companies to attract and retain talented and motivated employees—yet only 35% of organizations have a pay equity analysis built on a robust statistical approach and only 34% have a formal remediation process.2

Investors recognize that transparency can help eliminate gender pay gaps and that pay discrimination presents litigation, regulatory and reputational risk. That’s why we are urging companies to disclose policies and processes in place to manage pay equity, the results of their pay analyses and strategies to close any identified pay gaps.

Prior to 2016, very few publicly traded U.S. companies, namely The Gap, Inc., Salesforce and GoDaddy Inc., provided any disclosure around pay equity. But, as the topic began to dominate headlines, meaningful strides were made. A series of successful shareholder resolutions were directed at some of the largest technology companies, including Apple, which disclosed the results of its pay assessment and closed the pay gaps it identified. In addition, California, Massachusetts, New York and Maryland enacted significant changes to their state-level equal pay laws. In the spring of 2016, a group of nearly 40 investors wrote to S&P 100 companies asking them to commit to collecting, calculating and publicly disclosing pay data by gender, race and ethnicity. Finally, Pax Ellevate Management petitioned the SEC, urging the agency to require public companies to disclose gender pay ratios on an annual basis.

In 2017, Pax kept the momentum going with several engagements and shareholder resolutions targeted at companies in financial services—an industry that has among the highest gender pay gap and where women are more likely to leave at midcareer—in addition to technology and retail companies.3 Pax filed or co-filed shareholder proposals at Oracle, Goldman Sachs, BNY Mellon, Verizon, AT&T, Qualcomm, and Mastercard requesting that the companies disclose the percentage pay gap between male and female employees and take steps to address it. Of the seven resolutions we filed on pay equity in the 2017 proxy season, Oracle was the only company that did not reach out to us for a dialogue following the filing. As a result, the proposal went to a shareholder vote and received support of 38.7% at Oracle’s Annual General Meeting on November 15, 2017. Excluding inside ownership (Founder and Chief Technology Officer Larry Ellison owns 27% of Oracle’s shares), a majority of independent shareholders supported Pax’s proposal.

In 2018, we’re continuing to press for change. We filed shareholder resolutions at four companies, and successfully negotiated and finalized agreements with KeyCorp, Discover Financial Services and HP Inc. The level of disclosure that will be provided by these companies, and commitments to remediate unexplained pay gaps, is a significant improvement over what we have seen in the past and is a major step forward in the fight to close the pay gap.

The role of business has never been more critical in advancing gender equality, and all companies would be well served by proactively analyzing their pay structures by gender, race and ethnicity. Pay parity represents one step towards closing the overall gender gap in the workforce and helps position companies to take advantage of the entire workforce. It will require the combined efforts of many to disrupt the business as usual scenario of waiting another 170 years to achieve gender equality.4

Mercer, “Turning Disruption into Opportunity for Women and Business,” 2017.

The statements and opinions expressed are those of the author of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security.

Heather Smith, Lead Sustainability Research Analyst, researches and evaluates the environmental, social and governance (ESG) performance of companies for inclusion in the firm’s portfolios. She is also a member of the Pax World Gender Analytics team and the portfolio management team of the Pax Ellevate Global Women’s Leadership Fund. Heather is involved in overseeing the firm’s proxy voting and coordinating its gender related shareholder engagements.

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